Companies from the European Union (EU) are urged to use Asean as a production base for their manufacturing activities to penetrate into regional markets and other parts of the world.

International Trade and Industry Minister Datuk Seri Mustapa Mohamed said Asean with 600 million people and a combined gross development product of US$1.3 trillion offered good prospects and opportunities for the European companies.

Apart from the huge market, European companies and exporters would also benefit from Asean's close proximity to China and India.

“Asean countries need to attract more European companies to choose Asean as their single production base,'' Mustapa told a press conference in conjunction with the European Day Celebration 2011 luncheon yesterday .

He said European investors must also take advantage of the Asean Economic Community which was expected to be realised in 2015 when there would be liberalisation in the economic activities.

Mustapa said the EU was the largest trading partner for Asean and in 2009, total trade between the two groupings were US$171.8bil or 11.2% of their total bilateral trade, and EU was also the major source of investments for Asean.

He also met up with members of Asean-EU Business Council here. The event was represented by ambassadors from all the 27 EU countries.

Mustapa singled out Germany's Volkswagen which would be manufacturing Volkswagen cars in Pekan, Pahang for the Asean region as the best example of a single production base by a European company.

Although Asean would face stiff competition from China in attracting investors from Europe, he said Asean countries were equally attractive and competitive for investors and there is enough room for everybody. “We believe that European investors are not going to place all their eggs in a single basket and want to spread their investments in different parts of the world to reduce risks,'' said Mustapa.

Among the industries that Malaysia was keen to attract from European countries were oil and gas, chemical, high-end electrical and electronics and knowledge-based activities.

He said the third round of negotiations between Malaysia and the EU on the free trade agreement (FTA) would begin in Brussels today and the FTA was expected to be signed in mid-2012.